Contract Lectures Notes -summary only -2012/13 Consideration - Estoppel and Waiver–Not for further distribution. Promissory or Equitable Estoppel For details see: Clark (5th edn.) - 2 and pp. 504-506; C&C (4th edn.) Ch. 3 Sections 4 and 5; McDermott Ch. 2.; M. Enright, Principles of Irish Contract Law, Ch. 9; McDermott, Contract Law, Ch. 2 ,Parts IV an V; , Ch. 7.; O. Breen, Irish Law Times, ‘Proprietary Estoppel: Equity's Aid to those Left Behind’, (1998) 16 ILT 133; Delaney, ‘Legitimate Expectations and Substantive Effect: Recent Developments’ (2007) 29 DULJ 413. Selected English law texts: Stone and Cunnington, Text, Cases and Materials on Contract Law, 2nd edn., Ch. 3.4 Mulcahy and Tillotson, Contract Law in Perspective, (4th edn.), 8; G. Samuel, Contract Law, Cases and Materials: (pp. 193-202); Treitel, The Law Of Contract (12th edn.), pp.111-162. BNeil Andrew, Contract Law, Cambridge, Ch.5, 2011; R. Duxbury, Contract Law, 2nd edn, Sweet & Maxwell Ch.4, 2011; Phipps, Resurrecting the Doctrine of Common Law Forbearance’, (2007) 123 LQR 286. Dugdal and Yeats, ‘Variation, Waiver and Estoppel- A repappraisal’, (1976) 39 680. Richard Stone, Modern Law of Contract (9th edn.), Ch. 3.11-3.18. Austen-Baker, Richard: A Strange Sort of Survival for Pinnel's Case: Collier v P & M J Wright (Holdings) Limited - The Modern Law Review (71)(4) Major exception to rules on consideration - equitable relief for lack of consideration. Based on the concept of detrimental reliance or unconscionability - where one has conducted oneself to one’s detriment following upon a representation. Reliance upon the representation creates an expectation from which an estoppel may arise. May obviate the need for consideration. You are ‘estopped’ from relying on your strict rights because it would be inequitable to allow you to do what you have led someone to believe you will not do. For differences with contract see McDermott p. 136. Closely related to doctrine of waiver: one agrees not to rely on strict contractual rights. E.g. agrees to accept item late. Hickman v. Haynes (1875): buyer requested late delivery, then alleged breach of contract. Waived original right by making request. Charles Rickard v. Oppenheimer (1950) - first extension of time operated as a waiver. Could no longer enforce original delivery date. It was at one stage thought that promissory estoppel applied only where the statement which was relied upon was a statement of existing fact and not a statement of law or of intention as to a future event. See Jorden v. Money (1854) - Promisor informed the promisee, that the former would not seek to recover a debt owed by the latter. On foot of this statement, the promisee took on certain family commitments, which commitments he would not have taken on had the statement not been made. The House of Lords found, however, that as this was a statement of intention as to a future event (the non-collection of the debt) no estoppel could arise. A statement of future intention is not binding on the person making the representation. But distinction between statements of existing fact and statements of future intention has since been abolished. Hughes v. Metropolitan Railway Co. (1877) - tenants (defendants) had agreed to carry out repairs within six months on penalty of forfeiture of the lease. During this period, landlord and tenants entered into negotiations with a view to purchasing the lease. In the meantime it was agreed that the tenants would be allowed to postpone the repairs. Negotiations did not succeed - landlord claimed that the lease was forfeited. House of Lords - landlord’s conduct impliedly represented that he would not enforce the forfeiture clause at the end of the six-month period. Tenants had acted to their detriment by not doing the repairs and six-month period recommenced at the end of the negotiations. Lord Cairns: “…if the parties who have entered into definite and distinct terms involving certain legal results…afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who might otherwise have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealing which have thus taken place between the parties”. Property Trusts v. High Trees (1947).C&C p.165. Denning J: plaintiffs owned block of flats in . Leased to defendants who intended to sub-let - war broke out - agreement that defendant would pay half-rent. End of war - flats occupied - claimed full rent for June -Dec 1945. Court of Appeal: entitled to recover full rent for last two quarters of 1945 but for no earlier date. Obiter (i.e. not necessary to the decision) - only claiming for 1945, not for any earlier date. Interesting that estoppel not only suspended but eliminated obligation to pay for years 1940-1945. Possible extension to Hughes - originally thought that doctrine did not apply to suspension of payments. Promise (a) intended to be binding, (b) intended to be acted upon and (c) in fact acted upon. See also Kenny v. Kelly (1988) HC - C&C p. 167 - deferral of entry to UCD. Student told that she could defer entry. Representation estopped University from denying her deferred entry. There are certain conditions attached to the creation of an estoppel: 1. There must be a pre-existing legal relationship: estoppel cannot arise in a contractual vacuum. Cannot create new rights - only suspends those already in existence - ‘a shield, not a sword’. Combe v. Combe (1951) C&C p.168: “The principle stated in the High Trees case…does not create new causes of action where none existed before. It only prevents a party from insisting on his strict legal rights, when it would be unjust to allow him to enforce them”. “Cannot be a cause of action in its own right” - Friel. “Essentially a defensive action” - Clark and Clarke. But it is possible that relationship need not be based on contract - enough that there be a pre-existing legal relationship e.g. based on statute. Still unclear. Chartered Trust () v. Healy (1985) HC - C&C 171-contract for sale of lorry was void on account of fraud of a third party. Plaintiff who had financed deal through a HP agreement sought to enforce D’s HP obligations and D. counter-claimed for damages for P’s failure to provide consideration (i.e. title) for sums paid under HP agreement. P. attempted to argue for existence of a similar right of action (to that in contract) by means of estoppel. Barron J.: estoppel can only be used as a defence, not to create a new right of action. However, counter-claim succeded as total failure of consideration. But see Walton Stores v. Maher (1988) () (Stone and Cunnington pp. 216-220 )- suggests a promissory estoppel may be pleaded despite the absence of a pre-existing relationship. Lessors of a property, on foot of negotiations for the sale of a property, performed certain construction work thereon. When work was 40% done, potential lessees pulled out of negotiations. Although there was no contract here, the Court found that there was a promissory estoppel preventing the lessees from so doing. See Re J.R. (1993) HC C&C p. 176: deceased had promised his female (non-marital) partner that he would provide for her and specifically that his house would be hers on his death. Costello J. ordered that the proposed sale of the house be stopped notwithstanding the absence of any legal relationship between the parties - seriously doubted in e.g. Association of General Practitioners v. Minister for Health (1995) - O’Hanlon J: estoppel is a shield not a sword. See also Coughlan, (1993) 15 DULJ 188. RE J.R. more easily explained as a case of proprietary estoppel. See Baird Textile Holdings Ltd. V M & S plc (2001) EWCA Civ. 274. CA (Stone and Cunnington pp. (221-222 )- rejected extending doctrine of estoppel in English law along lines of Walton Stores case. BUT see now important case of SC: Anne B Courtney v Therese [2007] IESC 58, [FL14739] .Approved dicta of Brandon LJ in Amalgamated Property Company v. Texas Bank [1982] Q.B. 84 2. Clear and unambiguous representation must be made (although it may be implied from context). Statement of intent not sufficient nor is simple inaction without more. It is not enough merely to fail to enforce one’s rights: The Scraptrade (1983) Keegan and Roberts v. Comhairle Chontae Átha Cliath (Dublin Co. Co.) (1981) - the assurances made in this case were deemed too ambiguous to give rise to an actionable estoppel. Bennett Construction Ltd. v Greene and Greene (SC) 2004 3. Act of reliance - representation or expectation shaped the conduct of the party. Key point - not the agreement per se but the reliance upon the agreement that gives rise to the remedy of equitable estoppel. Debate: must it be a detrimental act of reliance? Or is it enough that the representation induced certain conduct? Presumably difficult to prove that there would be an inequity if reliance was not detrimental (see below point 4) Arguments against need for detriment: Lord Denning in Brikom Investments v. Carr (1979). See also Walton Stores v. Maher (1988) () - suggests detriment not required. Arguments for detriment: Tool Metal Manufacturing v. Tungsten Electric (1955) - Lord Tucker suggested that reliance should be detrimental. See also Morrow v. Carty (N.Ir., 1957) McCambridge v. Winters (1984), Industrial Yarns v. Greene (1984) (Ir.); Daly v. Minister for Marine (SC) 2001 C&C p. 181. All suggest detriment is necessary. Revenue Commissioners v. Moroney (1972) HC C&C p.173 (appeal to SC of separate issue) - father had persuaded his sons to sign a deed by representing to them that they would not be liable to pay the sum stated therein. Father was estopped from reneging on this promise. But it is arguably hard to see detriment in both Hughes (right to delay repairs) and High Trees (continued in business due to reduced rent). 4. Inequity must exist D & C Builders v. Rees (1965) 3 All ER 837: plaintiff reluctantly agreed to accept less than was owed for building work done for the defendants. Lord Denning suggested that but for certain facts, promissory estoppel might have been open: Defendants had acted inequitably. Lying about their financial situation (ability to pay) and exploiting the financial difficulties of the plaintiffs. Williams v. Stern (1879): defendant sold furniture on credit to plaintiff - would be seized unless payment was made by a specific date. Lender promised to extend time period by a week but subsequently seized furniture. If lender had not done so, goods would have been seized by the debtor’s landlord. Not inequitable to seize furniture in these circumstances => estoppel not available. Remember, equitable relief is discretionary. 5. Limited relief only Cannot finally eliminate a right - merely suspends or at best prevents enforcement for a limited time. E.g. High Trees, Tool Metal = right to compensation for use of patent suspended during war. Could claim from time war had ended. But estoppel seems to have prevented for all time the collection of the payments that were deferred during the war - e.g. the half-rent left unpaid during the war, in High Trees, could never be collected. Ajayi v. Briscoe Ltd. (1964) - once a representation has been made, an estoppel can end if the representation is withdrawn. Notice of such withdrawal must be given to the representee. I.e. one can resile from an estoppel by notice. Only suspends, does not extinguish. But see Ogilvy v. Hope-Davies (1976). See also Revenue Commissioners v. Moroney (1972) C&C 173- suggests that a right (here the right under the deed to collect money from the two sons) can be completely extinguished by estoppel. Proprietary estoppel Act to one’s detriment in expectation that one will receive an interest in property. [N.B. This remedy only applies to property). Cullen v. Cullen (1926) (C&C p. 183) Smyth v. Halpin (1997) 2 ILRM 38- C&C p.187: ‘this place is yours after your mother’s death’ - built extension onto house. Son entitled to reversionary interest. Crabb v. Arun District Council (1975) -C&C p.186- proprietary estoppel may give rise to a cause of action in its own right. See Re a Ward of Court (1993) – McDermott p. 135. Gillett v Holt (C&C p. 189). See now important case of Owens and Owens v Duggan and Duggan (HC) No. 133 CA. See Oonagh Breen ‘Proprietary Estoppel: Equity's Aid to those Left Behind’ (1998) 16 ILT 133. McFarlane and Robertson “The Death of Proprietary Estoppel” [2008] LMCLQ 449. N.B. See also H/L case Cobbe v Yeoman’s Row Management Ltd ((2008) H/L UKHL 55 and Thorner v Major UKHL 18. See legal blog on cases: http://www.no5.com/news-publications/publications/the-current-state-of-proprietary-estoppel-alive-and-kicking Detrimental reliance as a cause of action in its own right? Smith v. (1993) Finlay P. approved dictum of Lord Denning M.R. in Crabb v. Arun District Council (1986): “Short of an actual promise, if [a person] by words or conduct, so behaves as to lead another to believe that he will not insist on his legal rights knowing or intending that the other will act on that belief - and he does so act, that again will raise an equity in favour of the other, and it is for the court to say in what way the equity will be satisfied”. This seems to suggest a move away from promise-based to reliance-based theories of contractual liability. Unified Doctrine of Estoppel? Seen C&C. pp. 201-202 and Amalgamated Investment and Pty Co. Ltd. v Texas Commerce International Bank (1982). Legitimate Expectations See pp. 81-86; Friel pp 132-134; Clark and Clarke pp. 203-220. Delaney, Legitimate Expectations and Substantive Effect: recent Developments (2007) 29 DULJ 413. (westlaw.ie) Concept developed in public law context for judicial review of public bodies. Accepted in European Community law as a general principle of law. Basis is : ‘a public body which has committed itself to a certain course of action (either because of its past actions with respect to similar cases or because of promises made by it with respect to future dealings of a particular case) will be forced by the courts to honour that commitment. This is based on the assumption that such a commitment gives rise to a legitimate or reasonable expectation on the part of the person to whom the commitment has been given.’ Friel p.132. Doctrine is based on judicial review and so applies only to public bodies but the courts have interpreted this concept widely to include universities, Law Society of Ireland (see Abrahamson v. The Law Society of Ireland and the AG [1996] 2 ILRM 481 – C&C p. 206) and Medical Council. While developed in context of administrative law has been applied to contractual situations – see Donegal CC v. Porter et al. (1996) 2 ILRM 303 – where dismissal of Donegal firemen when reached age of 55 held incompatible with their legitimate expectations could continue to 60 if fit enough. But see Eoghan v. (1996) 2 ILRM 303 for limits. Leading case Webb and Webb v. Ireland (1988) IR 353- C&C p. 203- Plaintiffs found Derrynaflan Abbey treasure on third party land and handed over to National Museum and Director said would be ‘honourably treated’. Plaintiffs claim based on ‘legitimate expectation’ that would be rewarded based on prior practice in such cases. Supreme Court accepted and awarded sum ‘reasonable in all circumstances’. See also Re ‘La Lavia’ (1996) ILRM 194 – C&C p.205- for a case on treasure trove but where doctrine did not apply since no promise made by the State. In Webb case Finlay C.J. in accepting doctrine of legitimate expectations for first time in Irish law stated it to be : ‘ an aspect of the well recognized concept of promissory estoppel..’. This view was supported in Association of General Practitioners v. Minister for Health (1995) 2 ILRM and see also Kenny v. Kelly (1988) – IR 457 at 463 and C&C p. 167 and Re La Lavia [1999] 3 IR 413 (C&C p. 205) and Mary Hennessy v St. . HC. 17.2.2006. Irish Times of . Friel (p.133) , however, argues the doctrines of legitimate expectations and promissory estoppel while both apply when the defendant has ‘acted in such a way as to lead the plaintiff to believe that a particular course of action will take place’ are distinct: ‘promissory estoppel as it applies between private citizens can only be used by the defendants to suspend the enforcement of a legal obligation…legitimate expectations can be used to enforce a new legal relationship between the parties and provide new substantive rights’. As an example of such new rights refers to case of Duggan v. An Taoiseach (1989) ILRM 710 – where employees were assured would continue to be employed in a particular government office until legislation ended office– when work of office wound up w/o legislation entitled to compensation for breach of legitimate expectations. Friel’s analysis confirmed in recent Supreme Court case of Daly v. Minister of Marine (SC) . (C&C. p. 181 and p. 209). See also Abrahamson v Law Society – (1996) C&C p. 206 – and Power v Minister for Social and Family Affairs (2007) 1 ILRM 109, C&C p. 214. Orthodox/Restrictive Approach Liberal/Broad Approach Cannot create new cause of action Can be used to found new cause of action Pre-existing relationship necessary Pre-existing relationship not necessary Detriment required Detriment not required Only suspends rights Can extinguish rights for all time Elizabeth Gavin Unconscionability and Proprietary Estoppel: Striking a Balance Between a Formulaic and Subjective Approaches (2012) 30 ILT 88 6

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